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Market Structure and the Multinational Enterprise: A Game-theoretic Approach1

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  • Edward M Graham

    (Institute for International Economics)

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    Abstract

    Since at least the late 1950s, it has been recognized that multinational enterprises operate in imperfect markets characterized by oligopoly. The dominant “transactions-cost” theory of multinational enterprises does not wholly account for why this is so. The reductio ad absurdum of this theory would predict imperfect markets to be sure, but they would be monopolistic rather than oligopolistic. In this article, a simple model based on noncooperative game theory shows how oligopolistic markets can evolve from monopolistic ones. Also shown is that it is neither necessary nor sufficient that a firm have lower costs than its rivals in order to have an incentive to become multinational.© 1998 JIBS. Journal of International Business Studies (1998) 29, 67–83

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    Bibliographic Info

    Article provided by Palgrave Macmillan in its journal Journal of International Business Studies.

    Volume (Year): 29 (1998)
    Issue (Month): 1 (March)
    Pages: 67-83

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    Handle: RePEc:pal:jintbs:v:29:y:1998:i:1:p:67-83

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    Cited by:
    1. Keith Head & Thierry Mayer & John Ries, 2002. "Revisiting oligopolistic reaction: are decisions on foreign direct investment strategic complements?," Sciences Po publications info:hdl:2441/c8dmi8nm4pd, Sciences Po.
    2. Ott, Ursula F., 2013. "International Business Research and Game Theory: Looking beyond the Prisoner's Dilemma," International Business Review, Elsevier, Elsevier, vol. 22(2), pages 480-491.
    3. Dunning, John H., 2000. "The eclectic paradigm as an envelope for economic and business theories of MNE activity," International Business Review, Elsevier, Elsevier, vol. 9(2), pages 163-190, April.
    4. repec:spo:wpecon:info:hdl:2441/c8dmi8nm4pdjkuc9g8o1o6tag is not listed on IDEAS
    5. Edward M. Graham, 2001. "Subsidies, Market Closure, Cross-Border Investment, and Effects on Competition: The Case of FDI in the Telecommunications Sector," Working Paper Series, Peterson Institute for International Economics WP01-2, Peterson Institute for International Economics.
    6. Zhou, Dongsheng & Vertinsky, Ilan, 2002. "Can protectionist trade measures make a country better off? A study of VERs and minimum quality standards," Journal of Business Research, Elsevier, Elsevier, vol. 55(3), pages 227-236, March.

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